Fund investments rising

Has the Seoul main bourse hit rock bottom? That seems to be the growing consensus among investors as they have been flocking to index funds betting that the Kospi will continue to rise.

Such sentiment seems to have solidified since it hit 1,939.88 last Wednesday after slipping 1 percent or 19.56 points from the previous trading session.

Since then, the market has slowly ascended to close at 1,982.93 yesterday after gaining nearly 1 percent from the previous day.

According to Zeroin, a company specializing in fund investments, the outflow of investment has reversed. So far this month, investments worth 100 billion won ($97.8 million) have been injected into index funds. This is especially surprising considering that the market has been open for less than a week since the first day of May due to holidays including Labor Day, Children’s Day and Buddha’s birthday.

Roughly 38 billion won has been injected into Kospi 200 index funds, while other index funds enjoyed a net inflow of more than 75 billion won.

Considering that nearly 250 billion won has been put into equity funds, excluding exchange-traded funds (ETF), nearly half has been invested in index funds.

Last month, the NH-CA 1.5x Leverage Index saw more than 90 billion won taken out. As of Friday, 20 billion won had been put back in. The situation is the same for other index funds, including Woori Frontier New Index Plus Alpha, which saw nearly 25 billion won withdrawn last month and 9.7 billion won invested again as of Friday. The situation was similar for Hana UBS Power 1.5x Leverage, with 37 billion won of investment flowing out last month and 14 billion won invested so far this month.

“The Kospi index seems to be rebounding and shifting away from the continuous drop since late April,” said Cho Byung-hyun, analyst at Tong Yang Securities. “Uncertainties from home and abroad such as the tensions between Russia and Ukraine as well as the Korean won appreciation have eased, although the risks remain.”

Zeorin analysis showed that last week, local equity funds’ profits fell nearly 0.7 percent. The only equity funds that saw a growth in profit were dividend funds.

This is the second consecutive week that equity fund profit has shrunk.

While general equity funds retreated 0.74 percent last week compared to the previous week, those investing in small and midsize cap funds lost 0.65 percent. K200 index funds’ average profit rate was down 0.58 percent during the same period. Dividend equity funds gained 0.03 percent.

The retreat was largely caused by the fall in both stock markets. The Kospi index fell 0.57 percent last week while the tech-heavy secondary market saw a sharper drop of 2.23 percent as both foreign and institutional investors were offloading holdings.

The situation has turned around as foreign investors increased their stock holdings, particularly in Samsung Electronics, despite the hospitalization of Samsung Electronics Chairman Lee Kun-hee.

On Monday, the day after Lee’s poor state of health was reported, Samsung Electronics shares increased nearly 4 percent. Yesterday, it closed 0.86 percent higher at 1.4 million won.

By LEE HO-JEONG [ojlee82@joongang.co.kr]